Value Investment Memo: Applied Digital Corporation (NASDAQ: APLD)

Ticker: APLD
Current Price: ~$11.40
Market Cap: ~$2.8 billion
Industry: AI/Data Center Infrastructure & Digital Services

Investment Thesis

Applied Digital (APLD) provides digital infrastructure, AI-focused data center services, and HPC/cloud hosting. Built upon repositioning legacy crypto-data campus assets into AI-ready infrastructure, the company aims to generate long-duration revenue through tiered leases with AI users (e.g., CoreWeave). This represents a hybrid of real asset income and AI infrastructure growth—rare among publicly listed stocks.

Business Model & Monetization

  • Generates revenue through multi-year lease agreements and cloud/housing services targeting AI and HPC clients.
  • Recently signed a $7 billion, 15-year CoreWeave lease, enhancing its perceived growth potential (finviz.com, stockanalysis.com).
  • Also provides managed hosting services for HPC and cloud customers like NVIDIA-backed CoreWeave (stockanalysis.com).

Market Opportunity

  • AI & HPC data center market is expected to reach hundreds of billions over the next decade.
  • Ownership of adjacent crypto campus assets with power and grid-ready infrastructure lowers barriers to conversion.
  • APLD may present an AI-infra opportunity with institutional-grade leases and scalable recurring revenue.

Valuation & Earnings Snapshot

MetricLatest Stats
Revenue (2024 TTM)~$221 million (stockanalysis.com)
Net Loss (TTM)~$244 million
Shares Outstanding~225 million
EPS (TTM)–$1.39
EV~$3.47 billion
EV/Revenue~15.7×

The mix of legacy asset conversion and modern HPC leasing places APLD between REIT-like income and growth tech valuation.

Forward PEG Analysis (Adjusted Proxy)

  • APLD remains unprofitable, making traditional PEG irrelevant.
  • Using EV/Revenue Growth Proxy:
  • EV/Revenue multiple: ~15.7×
  • Revenue growth: +199% YoY in 2024 (stockanalysis.com, fintel.io)
  • EV/Growth Proxy: 15.7 ÷ 199 ≈ 0.08

This low proxy may suggest potential valuation flexibility as leasebook revenue scales.

Competitive Advantage

  • Holds rare, power-rich data campus real estate near grid infrastructure.
  • Immediate AI/HPC demand from high-profile users (CoreWeave, others).
  • Flexible asset base can be re-leveraged into future HPC or AI leases.
  • Institutional leasebacks may offer revenue streams similar to REITs.

Financial Overview

  • Cash-flow: Not yet positive, but capital-light recurrent revenue via leases.
  • Manages debt through asset-liability matched lease structures.
  • Ongoing investments align with revenue generating asset conversions.

Short Interest & Float

Implication: High short interest may contribute to price volatility—news-driven rallies may be exaggerated.

Analyst Coverage & Sentiment

  • Average 12-month price target: $10.35–$14.61, range $7–$18.90 (fintel.io)
  • Recommendation consensus: “Strong Buy” per ~9 analysts (fintel.io)
  • Potential upside based on analyst projections: +15% to +60% from current pricing.

Risks & Mitigants

RiskMitigation
Lease conversion delays or tenant attritionCoreWeave lease signed, provides revenue stability
Execution in asset repurposingCoreWeave action demonstrates operational capability
Volatility from short interestUse disciplined allocation in a high-volatility asset
Macro slowdown impacting leasing demandDiversified geography and asset adaptability

Conclusion

APLD offers a rare blend of AI infrastructure growth and REIT-like recurring revenue, underpinned by a massive CoreWeave lease and large data campus footprint. With a growth-adjusted proxy PEG of ~0.08 and a high short interest, the stock reflects characteristics of both value and speculative volatility. Analysts remain bullish, but the stock’s next leg relies on scaled lease execution—suggesting that timing and position sizing may be important.

Disclaimer: This article is for informational and educational purposes only and does not constitute investment advice or a recommendation to buy or sell any securities. The author is not a registered investment advisor. All opinions are the author’s own. Readers are encouraged to do their own research and consult with a licensed financial professional before making investment decisions.

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